Robos strike deals with firms

By Fiona Collie | Wednesday May 31, 2017

Credential and National Bank have signed agreements to use Nest Wealth’s robo-advisor platform

More financial advisors' businesses could become more tech-savvy, thanks to recent investments and partnership agreements between financial technology (fintech) startups and large financial services firms.

This spring, Toronto-based Nest Wealth Asset Management Inc. announced partnership agreements with Vancouver-based Credential Financial Inc. and Montreal-based National Bank of Canada. Under these agreements, advisors at the financial services institutions can use Nest Wealth Pro, a business-to-business (B2B) platform for advisors. Further, National Bank acquired a minority stake in Nest Wealth for $6 million.

As well, Montreal-based Power Financial Corp. announced last month that it will add $50 million to its investment in Toronto-based Wealthsimple Financial Inc.

For Randy Cass, Nest Wealth's founder and CEO, the recent partnerships involving the Nest Wealth Pro platform represent changing attitudes in the investment industry toward companies such as his own.

"A few years ago, startups like Nest Wealth and large financial institutions like National Bank might have looked at each other as competition," Cass says, "whereas I think now, particularly in the arena of an advisor-led platform such as Nest Wealth Pro, we look at each other as logical partners with the similar goal of providing consumers with the absolute best online experience they can have."

National Bank's management agrees, having signed a licensing agreement with Nest Wealth to access the white-label Nest Wealth Pro platform for the bank's advisors.

"We really want to equip our advisors with more technology to help them better serve the client," says Martin Gagnon, executive vice president of wealth management at National Bank and co-president and co-CEO of its brokerage subsidiary, National Bank Financial Ltd. (NBF).

National Bank is working on plans to roll out the Nest Wealth Pro platform to NBF's investment advisors over the coming months. The white-label platform provides advisors with a digital "onboarding" process for clients, which captures "know your client" and risk- profile information. As well, Nest Wealth's platform is "product agnostic," meaning advisors can customize client portfolios with products of their choice.

The bank also wants to offer the technology to its branch-based financial planners, but doing so will require "a little bit of tweaking," Gagnon says, because Nest Wealth Pro works through the Investment Industry Regulatory Organization of Canada, while National Bank's planners are licensed with the Mutual Fund Dealers Association of Canada.

Nest Wealth Pro also will prove useful to National Bank's discount brokerage, InvestCube. That quasi-robo advice platform currently offers six ETF portfolios to clients. The InvestCube platform operates like a robo-advisor in that it automates asset allocation and rebalancing.

However, unlike a typical robo-advisor, InvestCube offers no digital onboarding process to its customers. Instead, clients must call the discount brokerage to set up an investing account.

Rather than trying to build a digital onboarding process in-house, National Bank decided to sidestep the process by partnering with Nest Wealth.

"We had begun that project [to build client-facing technology] and, at some point, we said, 'Let's just do [the deal with Nest Wealth]'," says Gagnon. "It makes much more sense and it also can bring more tools to our advisors."

The recent investment from National Bank will help enable Nest Wealth to hire more staff for its client-facing team and expand operations, including the Nest Wealth Pro platform. Currently, Nest Wealth has deals with five financial services firms, including National Bank and Credential, to use its advisor platform. Cass hopes to increase that number by signing a similar deal with an institution outside Canada.

"Our vision is to be outside Canada with a signed contract within the year," Cass says.

Such partnerships between large incumbents and fintech startups will become the norm as large financial services firms look for ways to catch up to clients' digital expectations quickly, according to Kendra Thompson, managing director and head of global wealth management with consulting firm Accenture LLP in Toronto.

"At this stage, the debate really is over," Thompson says. "There is a push toward much more digital experiences and, as a result, large organizations are realizing [that they] need these [online] capabilities in order to deliver on that."

Power Financial is another large financial services corporation that has invested significantly in Canadian robo-advisors. Power Financial's recent investment in Wealthsimple brings the former's total investment in the fintech company to $100 million.

Wealthsimple, which now has $1 billion in assets under administration, plans to use the new funding to expand its services, particularly its advisor platform.

"One of our big priorities as a company," says Michael Katchen, founder and CEO of Wealthsimple, "is growing the Wealthsimple for Advisors business, the breadth and scope of the services we're offering and the number of firms we're able to support."

Wealthsimple, which has 300 advisors on its B2B platform, recently launched a white-label option for its Wealthsimple for Advisors offering and now allows advisors to work with U.S.-based clients on that platform.